Just vocalizing here, might help to clear my head a little.
We’re in a funny situation. We moved into our PPOR which we built about 9 month ago. We thought it would be a 2-3 your house and then we’d sell and move on. In the mean time, thinking we’d pick up an IP for around $350k mark to run alongside.
After moving in, we find that the growth areas authority have decided that the land opposite us is to be re-zoned and developed and that the road we currently front will become a service lane and that a new, wider road will be built to carry more traffic.
We don’t fancy the thought of living through the construction, so we put our house on the market and found an awesome place we fell in love with to move on to.
We lost the new place as ours didn’t sell in time to make the finance clause date.
We had a look at another property last week, more out of curiosity as we don’t have a buyer yet, but we only went and flippin loved the place and would really like to make a go for it. It’s 107 years old, fully restored and in a great part of town. Something that doesn’t come up very often.
The vendor wants a long settlement, but won’t accept offers from people that have a house to sell, unless they can bridge the finance.
The vendor is happy with what we have offered money-wise, but not subject to us having to find a buyer for ours, which is fair enough. The vendor will only look at a 14 day finance clause, so we don’t even have the luxury of a 30 day finance to help get our place shifted.
Now, here’s the dilemma. We can keep ours and rent it out and still be able to move on the new place. It’s tight, but do-able. We can just about afford to hold it vacant, (obviously would not want to), but at least the fact we can makes for some peace of mind, and we have a cash buffer.
My worry is that we wouldn’t be able to tenant it during the road works and development of neighboring land; however, I’m sure if we dropped the rent low enough we’d find someone?
My other worry is a rocketing in interest rates and drop in house prices. Would the development right across the road help or hinder house prices of ready-built houses directly opposite, (i.e. ours)?
If we can hold it for 5 years to see the development work through, then all should be well as the added infrastructure, shops and schools should see values increase.
I think I’m just too risk averse? We’ve talked about investing for so long, almost bought an IP last year but it fell though at the last minute. Here we have the opportunity to have a quality IP in a great area and we’re too frightened to go for it!
I think what’s putting me off is the whole reason for us moving in the first place was to position ourselves in a more saleable property should we need to bolt for whatever reason. The numbers look ok to me for keeping ours as an IP, but it worries me that not only would we be keeping a house that we wanted to sell due to the developments around, but also buying another house on top! Maybe I’m just worrying too much, as on the face of it; it’s in a great area and a very high quality house. If we can see it through, then all should be rosy.
I suppose another way to look at it is that we could always move back into it and sell the other place if worst came to the worst.
After stamp duty and purchase costs plus LMI on the new place, we’d have 80% LVR on the current PPOR and 86% LVR on the new one. Current PPOR valued $625+, (I reckon more like $600k though), and new place $570k so on the face of it there’s still some fat in the equity should the brown and smelly hit the round and spinny. If the PPOR is vacant we can just about cover all costs of both houses from our wages. Then, after 12 months we’d get a decent tax return as deprecation would be around $15k, plus the interest on the tax deductible part of the loan ($363k) and we’re both 38% tax payers, so the rebate after the first year would then help out next year, and that’s without dipping into the cash reserve (not huge, but enough for some peace if mind). I think I’m talking myself back into it again.
Anyway, would love to hear any thoughts and I’m happy to post specific numbers if anyone is interested enough to pass comment on whether it’s a good idea.
I had a similar issue re building works, I rented a property on a 12 month lease just prior to extensive noisy works going on on the outside of the building, render landscaping etc.
Never heard a peep from the tenant.
I dont think you'll have to drop the rent that much because its on a main road, if at all. Capital growth prospects may be impacted, but that happened as soon as the decision was made to widen the road, nothing you can do about that now.
Why not go ahead with the new purchase, and put your place up for rent. hold it for a year, and then decide whether its a long term rental or put it on the market then?
you can always sell during the lease term as well, the new purchaser just has to honour any fixed term lease agreement in place.
I have a difficult to sell house. I rented it out - it has a very high yield as I've had the house for slightly over 7 years now.
Having tenants in it is making it even more difficult to sell, unfortunately. So while it is great to have all the money from renting it out, I've had the house much longer now than I wanted to.
Propagate said: ↑
We can keep ours and rent it out and still be able to move on the new place. It’s tight, but do-able. We can just about afford to hold it vacant, (obviously would not want to), but at least the fact we can makes for some peace of mind, and we have a cash buffer.Click to expand...Do this one IMO.
Propagate said: ↑
My worry is that we wouldn’t be able to tenant it during the road works and development of neighboring land; however, I’m sure if we dropped the rent low enough we’d find someone?Click to expand...Yes, there is always a tenant at the right rent, no matter where the IP is.
Propagate said: ↑
My other worry is a rocketing in interest rates......Click to expand...You worry a lot If this is a concern then lock the IRs in eddie. Fixed rates have fallen recently.
Thanks for the replies.
It does make sense to keep hold of it rather than fire sale it, and if we had managed to carry out our original plan of buying 2 IP's at around $350k each starting with the first last year and the second next year our holding costs and ,mortgage would be more than doing what we are proposing with the PPOR. Rent would have been a little more, but not massively more.
I think it's just getting into the mindset of carrying the extra load when we had decided to do a sideways move and pay down the home loan in double-quick time.
CBA, who we have sent our paperwork in to see if we can refi the PPOR and finance the new place, are doing 7.44% fixed for three years. I think there's even a discount on that if you take the wealth package? It's an attractive rate, and a decent time frame. We may look at fixing a portion if the new PPOR and leaving the remainder variable to use for an offset and we'll probably go variable if we rent this place out as we'd need to know were' flexible to move it on in 12 months without a big penalty payout paying the mortgage off.
I'll chase the bank tomorrow, see how we're looking on paper and we'll head off to see the new place again this Saturday, following it up with a firm offer I reckon, (assuming CBA have some good news tomorrow).
Well, CBA reckoned no probs on finance on Friday, just a bit of a pain as we are not with them so refinance of our place may delay the finance a bit.
We put our offer in on the new place on Saturday which was accepted.
So, all looks good.
Going back to our own bank tomorrow to see if they can also do the finance to make things a bit quicker and easier.
Very excited. Settlement on 5th november all being well.